Millennials In The Market: Tips For Saving To Buy A Home In New York City

Real Estate

Young adults are expected to take up nearly half the national home-buying market by the end of this year, according to a  recent report. Shutterstock

With the cost of housing rising, Millennials buying property in New York may seem mythicalbut the city is in line with a national uptick in home-purchasing among adults aged 35 and younger, experts say. Those in that age group could account for 43% of property buyers in the United States by the end of 2018, reported Realtor.com.

New York is the 12th most expensive state in the country with a median home value of $282,100 as of July, up 4.1% from a year prior, according to data from the national listings site Zillow. New York City, meanwhile, is the 7th most expensive city in the U.S., with a median of $672,200.

Comparatively, San Francisco is the priciest metropolitan area in the United States, with its median at $1.366 million, and Cleveland is the cheapest at $53,000, Zillow found.

And though real estate brokers tend to call current interest rates low, the national 30-year fixed rate was 4.51% as of August 23, according to Freddie Mac. That is down from 4.66% in May, but it’s among the highest rates from the last five years.

Young adults are also still rebounding from the recession, others added.

“A big factor here is that the income, particularly in New York City, has not nearly increased to the degree that real estate [prices have],” noted Rory Bolger, a broker with the firm Citi Habitats.

It doesn’t help that many graduated from college right as the economy fell, said Alicia Criner, a Manhattan resident of 10 years. “The class of 2008, that was the year the market burst and half my classmates either lost their jobs or did not get jobs,” she said.

But Criner herself is proof that Millennials can buy property, as the 31-year-old recently purchased a one-bed, one-bath co-op in the upper Manhattan neighborhood of Hamilton Heights.

Criner, who works in marketing for a global beauty products company, came up with $87,000 for a down payment by diligently saving from her paychecks and dipping into her 401k for the rest. Several of her friends also recently bought their first homes, she said.

Among them is Lise Keeney, a 30-year-old tech publicist who had $38,000 saved for the down payment on the one-bed, one-bath she bought in Weehawken, New Jersey, just outside the city, in May.

Both said buying real estate was an ideal way to invest the money they so persistently collected. “At the very worst it would be an apartment I could afford,” Keeney said, “and at least that way every month I was putting money towards something I would get money back on.”

Scott Bonora, New York City branch manager with the mortgage firm loanDepot, confirmed the trend. “We’re definitely seeing a good amount of millennials buying [properties],” but it isn’t easy for them, he said.

“How do they buy in New York City where everything is so expensive and everything being built is ultra-luxe condos?” he asked, adding that “there’s an already tight supply to begin with and everything new is expensive.”

To answer this question, I collected tips from experts on how to buy your first home in and around the city:

Have an open mind.

“The first thing I say to customers that call me is, ‘You just have to have an open mind as far as where you’re willing to buy and live,’” Bonora said, meaning that first-time purchasers may need to look in the outer boroughs and the suburbs for properties they can afford. “Half a million dollars is not going to get you a whole lot of space or a whole lot of windows [in Manhattan],” he continued.

For Keeney, affordability was a big reason why she picked Weehawken. “Manhattan was totally out of the question in terms of budget,” she said. But the area works for her since the commute to Port Authority from her apartment is just 20 minutes. Criner wanted to live in the city limits, so she looked at co-ops, which are typically less expensive than condos. Getting approved by the building’s board was an exhaustive process, however  “so painful I went back to therapy,” she said. But, she added that in her experience, “condos in New York are easily $100,000 more than a comparable co-op.”

Consult an expert.

“Talk to a mortgage professional first,” as they can help determine “where you’re at right now and what you can afford,” Bonora recommended. For example, loan officers can assess your credit score and help you improve it, he said. “A lot of the younger generation, they may not think that having a couple credit cards is a good thing but you have to have an established credit history,” Bonora added. “Most banks want to see that you have a two-year history of making on-time payments.”

A mortgage expert can assess your financial qualifications. Shutterstock

Chat with peers.

Put simply, people need to feel comfortable saying that they’re saving money. Criner said, chuckling, “my friends think I’m joking but I’m like, ‘You guys, I’m poor so if you want to go out with me we’re going to do a picnic in the park.” She also refrained from taking vacations and eating at expensive restaurants to save cash instead. “There needs to be a culture of just being open about money and where people are in their own financial situation,” she explained.

Criner also has what she calls an “accountability buddy,” a friend, or group of friends, whom she checks in with monthly to discuss their savings goals and accomplishments. They ask each other questions like, “Did everyone commit to saving $500 this month? Did you cut out your cable, did you lower your cell phone bill?” she said.

Stay put or downsize.

Criner and Keeney both opted out of moving to nicer digs when their incomes rose over the years. Instead, Keeney stayed in the same home she moved into when she first got to New York City in 2011 until she bought her own place. “I never left that apartment and each time I would get a raise I would just try to push that much more into savings,” she recalled. “It would have been awesome to have a doorman apartment and get my packages shipped to my apartment instead of having [them] sent to work,” she added, but if you’re paying $1,800 a month in that building instead of $1,300 for one with a buzzer, “that’s $500 that you’re basically not saving.”

Bolger added that he’s seen clients move to smaller and cheaper apartments to have extra money to save. “Because the prices are so crazy in the city, particularly in Brooklyn, now there is this feeling that Millennials are downsizing their rent so they can purchase outside of the city,” where they can have a private house with a yard, he explained.

Use banking benefits.

Those being paid by direct-deposit can often have their banks automatically take money out of their paychecks, removing the responsibility of putting it into savings themselves. “I had $1,000 of each paycheck going into my high-yield savings account so I never saw it hit my checking account,” Keeney said. She prefers Synchrony Bank, which offers 1.85% interest for savings accounts, but Criner noted that an investment account with a return of 3 to 5% is even better in the current economy.

In addition, mortgage companies like loanDepot have knowledge of numerous banks and loan programs that can fit various needs, Bonora said. For example, some financial institutions are willing to lend money to freelancers or those with alternative compensation such as company stock, he said. Others, like the Hudson Valley Credit Union, offer adjustable mortgage rates that grow over time. And New York state has a bond program that can require 3% of a purchase price as a down payment or as little as $3,000 in some cases.

Be patient.

From saving the money for a down payment to getting approved for a mortgage and closing on a property, buying a home is a long process, experts said. If you can’t afford to purchase a place immediately, a loan officer can tell you how to get there, Bonora assured. For Criner, from negotiating with the seller to getting approved by her co-op board and picking a closing date, purchasing her apartment took the better part of a year — and that was after she found a place she liked. “Keeping the faith, knowing that you’re closer than you think you are” is key, she said.

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